Use Savings To Pay Credit Card Debt Faster?

Discussion in 'Sidewinders Bar & Grille' started by Rounder44, Oct 7, 2021.

  1. Rounder44

    Rounder44 Strat-Talker

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    Hi,

    For the sake of argument say I I have $10,000 in savings and $10,000 in credit card debt (at ~14% APR)

    Current pay back schedule will have the CC paid off in 6 months so only ~$700+/- in interest.

    I'm leaning towards not touching the savings at all OR add to payments occasionally to get debt down faster. I just pulled out a few $100 to make sure I'm on schedule.

    IF things remain the same I'd easily be whole in my savings in 6 months or less. $700 ahead too!

    Any one here have good money sense and can advise me?

    Thanks!
     
  2. Boubou

    Boubou Senior Stratmaster Gold Supporting Member

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    If you had bought $10000 of Tesla stock last year you would have $60000.
    But not paying your credit card as fast as possible is throwing money out the window
    Pay the credit card, make the same monthly payment in your savings account, at the end you are $700 richer, new guitar or amp for free
     
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  3. ido1957

    ido1957 Senior Stratmaster

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    Lol - money advice on the internet?
     
  4. FireFunkRevival

    FireFunkRevival Strat-O-Master

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    Stop everything you are doing. Read the book the total money makeover. Apply said principles and later in 5 years thank yourself/pat yourself on the back. The borrower is SLAVE to the lender. That's biblical. Listen to his podcasts daily to stay focused. Trust me when I say it works and if you're trying to manipulate a system, you will likely fail. Trust that plan.
     
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  5. FireFunkRevival

    FireFunkRevival Strat-O-Master

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    It works 100% of the time no matter what stage of life you are in.
     
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  6. davi3blu3

    davi3blu3 Strat-Talk Member

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    Generally, credit card interest is 15% plus. Your savings account is probably growing at less than 1%. Using that math it makes sense to pay it off.

    however, I would say keep some emergency savings back. 3 months of income or so is the general rule. You never know what might pop up, unexpected car repairs etc and you don’t want to have to put that on the credit you just paid off!

    cheers
     
  7. heltershelton

    heltershelton Vivamus libero Vivamus duris

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    when i was about 14 my grandma told me to never own a credit card.
    i followed that advice and still to this day have never owned one.
    pay off the debt asap, then like what was already stated, put those payments back in savings.
     
  8. FireFunkRevival

    FireFunkRevival Strat-O-Master

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    Should actually say the dave Ramsey show so you know which podcast to listen to.
     
  9. sam_in_cali

    sam_in_cali Scream for me Strat-Talk! Silver Member

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    The best advice I was ever given was to attend one of Dave's Financial Peace University courses. Man, what a life changer. The best way I can explain it is like going to a gym on your own or going with a personal trainer. Ya, you can probably do just fine on your own if you have some discipline and clear goals but you will probably be a whole lot more successful with some help.

    To the OP, keep a small sum aside for emergencies and whatnot, pay off the debt ASAP, then rebuild your savings.
     
  10. Roach769

    Roach769 Strat-Talk Member

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    Most people use credit cards improperly and don't really get taught the proper way to use them. Credit cards are actually alot smarter and safer than people realize.

    Credit cards can be leveraged to make you money if you don't hold high balances on them. And are safer than using your debit. Most banks are federally insured. So, if something happens then you are somewhat safe but the recovery process is lengthly. With Credit..you spend their money not yours. If the credit card gets compromised...they flip a switch do an investigation and youre good because they are insured. If you bank card is compromised they can drain your savings with overdraft if you have it kicked on.

    The key is to keep your total credit utilization below 30% and pay it off every month. People should realize that credits should be used to buy stuff, pay off bills, and do other things. Credit card companies pay you cashback to use them so it puts money in your pocket to spend there. Your bank/checking account should only be used to transfer money.
     
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  11. FireFunkRevival

    FireFunkRevival Strat-O-Master

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    I fully agree. This is solid advice that will never fail. Taking on debt is like swallowing flaming swords in a circus. Sometimes you'll pull it off but sometimes you will bleed out and catch on fire.
     
  12. FireFunkRevival

    FireFunkRevival Strat-O-Master

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    30% debt can turn into a mountain quick if you lose your job or don't have the ability to stop. Most of the time it is a spending issue if you don't have cash. If you don't have cash you don't need it typically. A mortgage is about the only thing I would think is a somewhat reasonable debt. At least it should repay you if you are buying smart.
     
  13. henderman

    henderman Dr. Stratster

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    whatever debt has the highest interest is the one to pay off first.

    it does not matter how much you make it matters how much you cost.

    reduce cost.
     
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  14. FireFunkRevival

    FireFunkRevival Strat-O-Master

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    A credit score doesn't = success or wealth. It's a score at how good you are at borrowing money and paying it back. Aka living above your means. If you are borrowing money you either have an income problem or a spending problem. I know many people with 800 plus credit scores with absolutely no money. It's a trap. Run and never come back.
     
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  15. sam_in_cali

    sam_in_cali Scream for me Strat-Talk! Silver Member

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    Truth.
     
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  16. rolandson

    rolandson Dr. Stratster

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    I view debt as a Sword of Damocles over my head. So I don't. Have any. If I can't afford it by the end of the month, I don't buy it.
     
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  17. Sarnodude

    Sarnodude Most Honored Senior Member

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    The way I use credit cards pisses off the VISA people. I pay off my balance in full every month.
     
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  18. StratSounds

    StratSounds Senior Stratmaster

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    There are a few ways you can look at it. A financial advisor once told me to pay off the credit card with savings and then consider the credit card your emergency funds. That makes a lot of sense, but there’s something about having access to cash that is comforting too.

    Everyone always screams “pay off the cards, that is the worst kind of debt”, but if you have a card with a low rate, say 10% or lower, sure, you’re still going to pay the bank a fairly high interest and it compounds, but I’ve kind of gotten over it to an extent. Personally I’d rather pay the bank the interest I owe for their “loan” to me via the credit card and still have access to a decent stockpile of cash. It’s a psychological thing for me. Sure, I still strive to pay off the card, but I’m just not willing to cash out in order to do so.
     
  19. stormsedge

    stormsedge Senior Stratmaster Gold Supporting Member

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  20. guitarface

    guitarface Most Honored Senior Member

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    That’s a high interest rate. Get rid of it ASAP. Being broke is better than continually accruing debt.